Dealer Sentiment Index - Cox Automotive Inc.€¦ · dealer population. Data is used to calculate an index wherein a number over 50 indicates more dealers view conditions as strong

ThDealer Sentiment IndexT H I R D Q U A R T E R 2 0 1 9

Dealer Sentiment IndexT H I R D Q U A R T E R 2 0 1 9

BackgroundData for the Cox Automotive Dealer Sentiment Index (CADSI) is gathered via a quarterly online survey of franchised and independent auto dealers.

Dealer responses are weighted by dealership type and volume of sales to closely reflect the national dealer population. Data is used to calculate an index wherein a number over 50 indicates more dealers view conditions as strong or positive rather than weak or negative.The Q3 2019 CADSI is based on 1,115 U.S. auto dealer respondents, comprising 595 franchised dealers and 520 independents. The survey was conducted from August 6 to August 18, 2019. The CADSI was first published in Q3 2017. The next quarterly report will be released in December 2019.

Dealer Sentiment Index Q3 2019 2

Key TakeawaysAccording to the Q3 2019 Cox Automotive Dealer Sentiment Index (CADSI), U.S. automobile dealers view the current market as negative, with an index score of 48. The slight decrease from Q2’s score of 49 was not statistically significant. The index reading of 48 indicates that slightly more dealers feel that the current market is weak compared to the number who feel the current market is strong.

Expectations for the next quarter fell in the Q3 survey as well, but remain in positive territory with an index score of 51. The decline in expectations was statistically significant from last quarter’s score of 55, and it was driven by a decline in expectations by both franchised and independent dealers.

Year-over-year comparisons reveal an important contrast among dealers in expectations for the next quarter.

3Dealer Sentiment Index Q3 2019

Franchised dealers saw a decline, but remained in positive territory. Independent dealers, on the other hand, saw a larger decline, and their expectations score fell below 50 for only the second time since the CADSI began in Q2 2017.

“Dealers are becoming less optimistic as they consider the future,” said Cox Automotive Chief Economist Jonathan Smoke. “We also continue to see a big difference in outlook by type of dealer, as sentiment consistently skews more positive for franchises compared to independents.”

For franchises, the current new-vehicle sales index was also down compared to last year, but stable compared to last quarter. The new-vehicle sales index remains above 50 indicating a good market. Franchises continue to see the used-vehicle sales as stronger than

new. They also report both new- and used- vehicle inventory continues to grow.

For independents, the used-vehicles sale index in Q3 was negative at 49, a score slightly lower than last quarter and Q3 2018. Factors influencing a pessimistic view of the current market are the perception of a weakening economy, consumers being less interested or more cautious about purchasing vehicles, and having a hard time to find inventory or having a lack of used-vehicle inventory.

When asked about factors holding back the business, dealers in aggregate reported no change from Q2 to Q3. Market Conditions remained in the top spot as the most cited negative factor. Competition remained in second place. Limited Inventory remained number 3, followed by Credit Availability for Consumers and Expenses.


Strong

Weak

48

4546

49

51 51

44

4849

48

5455

5455

56

59

5150

54

56

46

4243

47

50

48

42

4748

46

Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019

Overall Franchise Independent

Q1: How would you describe the current market for vehicles in the areas where you operate?

4

Note: Scale 1 - 100

Dealer Sentiment Index Q3 2019


Strong

Weak

Q2: What do you expect the market for vehicles in your area to look like 3 months from now?

5

55

5253

70

5657

49

63

55

51

64

57 57

73

69

61

54

62 62

57

5251

52

70

52

55

47

63

52

49

Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019

Overall Franchise IndependentNote: Scale 1 - 100



Strong

Weak

Q3: How do you rate the customer traffic to your dealership over the past 3 months?

6

3837

3435

4041

33

35

42

40

4342

45

4344

46

41

38

45

47

36 36

31

33

39 39

30

33

41

37

Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019




Strong

Weak

Q4: How would you describe your profits over the past 3 months?

7

44

41 41 4143

42

38 38

4442

4850

49 4951

49 49

43

5152

43

38 38 38

4140

3536

42

38

Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019

Overall Franchise Independent Note: Scale 1 - 100



Easy

Difficult

Q5: How would you describe your ability to get credit to operate your business over the past 3 months?

8

59

55

57

61

59 5960 60

6160

6766

68

70

65

67

6968

6766

56

52

54

5857 57 57

5859 59

Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019




Growing

Declining

Q6: How would you describe the cost of running your dealership over the past 3 months?

9

6968

67 67

70

6768

69

6665

69 69 6968

70

67

6970

67 67

70

6766 66

69

6768

69

6665

Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019




Good

Poor

Q7: How would you describe the current new-vehicle sales environment?

10

57 57

61

65

5960

57

5354

55

57 57

61

65

5960

57

5354

55

Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019

Overall FranchiseNote: Scale 1 - 100



Q8: How would you describe the current new-vehicle inventory levels?

11

67

62

68

61

57

5960

64

61

67

62

68

61

57

5960

64

61

Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019


Growing

Declining



Q9: How would you describe the current new-vehicle inventory mix?

12

7572

7572

Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019


Good

Poor


Note: New question introduced in Q2 2019


Q10: How would you describe the current used-vehicle sales environment?

13

5557

5556

5557

5153

5655

7068

6769

72 72

6866

7273

50

5351

5250

52

4648

5149

Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019


Good

Poor



Growing

Declining

Q11: How would you describe the current used-vehicle inventory levels?

14

51

53

59

4948 48

54

4647

55 55

62

58

52

54

62

5354

50

53

58

4546 46

52

44 44

Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019




Q12: How would you describe the current used-vehicle inventory mix?

15

63 63

6665

62 62

Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019


Good

Poor


Note: New question introduced in Q2 2019


More

Less

Q13: How much pressure do you feel to lower your prices?

16

6463

67

62

6463

67

6364

63

65

67 67

62

6665

67 6766

65

6362

67

6263 63

66

6263

62

Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019




Growing

Declining

Q14: How would you describe your dealership's current staffing levels?

17

52 52 52

54

52

50 50

48

5049

5655 55

60

55

5352

5354

53

5051 51

5251

49 49

47

4948

Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019




Large

Small

Q15: How would you describe the current level of OEM new-vehicle incentives?

18

4848

Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019



Note: New question introduced in Q3 2019.


Strong

Weak

Q16: How would you describe the current U.S. economy?

19

555555

Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019



Note: New question introduced in Q3 2019.

Overall: 55Franchise: 55Independent: 55

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Factors Holding Back Your Business?

Significant decrease vs previous quarter

Significant increase vs previous quarter


OVE

RA

LL R

AN

K

Q3 ’19 Q2 ’19 Q3 ‘181 Market Conditions 38% 40% 37%2 Competition 33% 35% 35%3 Limited Inventory 31% 33% 38%3 Credit Availability for Consumers 31% 31% 35%4 Expenses 25% 29% 29%5 Economy 23% N/A N/A6 Political climate 14% N/A N/A6 Consumer Confidence 14% 13% 16%7 Consumer Transparency in Pricing 11% 12% 15%7 Interest Rates 11% 16% 17%8 Weather 10% N/A N/A9 Staff Turnover 9% 12% 12%10 Credit Availability for Business 7% 6% 9%10 Regulations 7% 7% 7%10 Too Much Retail Inventory 7% 7% 5%11 Tariffs on Imported Vehicles and Parts 5% 4% 5%11 Dealership Systems/Tools 5% 5% 7%12 Lack of consumer incentives from my OEM 4% N/A N/A13 OEM Mandates/Restrictions 3% 4% 5%


21





Q3 ’19 Q2 ’19 Q3 ‘181 Market Conditions 37% 39% 40%2 Competition 36% 37% 37%3 Economy 26% N/A N/A4 Staff Turnover 22% 25% 28%5 Credit Availability for Consumers 21% 23% 23%6 Expenses 20% 21% 25%6 Limited Inventory 20% 19% 28%8 Political climate 19% N/A N/A9 Lack of consumer incentives from my OEM 18% N/A N/A10 Consumer Confidence 17% 22% 20%10 Interest Rates 17% 26% 22%12 OEM Mandates/Restrictions 14% 17% 21%13 Consumer Transparency in Pricing 11% 12% 18%13 Weather 11% N/A N/A14 Tariffs on Imported Vehicles and Parts 8% 6% 7%15 Dealership Systems/Tools 7% 7% 12%16 Too Much Retail Inventory 5% 6% 3%17 Regulations 4% 4% 5%18 Credit Availability for Business 2% 1% 2%


FRA

NC

HIS

ED D

EALE

RS

22





Q3 ’19 Q2 ’19 Q3 ‘18

1 Market Conditions 38% 40% 36%

2 Limited Inventory 35% 38% 41%

3 Credit Availability for Consumers 34% 33% 39%

4 Competition 32% 34% 34%

5 Expenses 27% 31% 30%

6 Economy 22% N/A N/A

7 Consumer Confidence 12% 11% 15%

7 Political climate 12% N/A N/A

8 Consumer Transparency in Pricing 11% 13% 13%

9 Weather 10% N/A N/A

10 Credit Availability for Business 9% 7% 12%

10 Interest Rates 9% 13% 15%

11 Regulations 8% 8% 7%

12 Too Much Retail Inventory 7% 7% 5%

13 Staff Turnover 5% 7% 7%

14 Dealership Systems/Tools 4% 5% 5%

14 Tariffs on Imported Vehicles and Parts 4% 4% 4%


IND

EPEN

DEN

T D

EALE

RS

The Effect of Automotive Tariffs



Positive

Negative

Q: Will a tariff on imported vehicles have a positive or negative impact on your business

24

37 36 37 37 36

27 2628 28

25

40 39 40 40 39

Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019



Q: Which of the following best describes the impact on your business’ profitability next quarter if tariffs are imposed on imported vehicles and parts?


Import Tariff Impact (Full Breakout)Q3 ’19 Q2 ’19

OVERALLPositive Impact 8% 9%

No Impact 56% 55%

Negative Impact 36% 36%

FRANCHISE (A)

Positive Impact 8% 8%

No Impact 33% 39%

Negative Impact 59% B 53%

INDEPENDENT (B)Positive Impact 8% 10%

No Impact 63% A 60%

Negative Impact 29% 30%

Arrows indicate significant increase vs previous quarterArrows indicate significant decrease vs previous quarter

25

A/B indicates significant difference between groups

Q: What, if any, negative impacts would imposing tariffs on imported vehicles and parts have on your business? Please select all that apply.


Negative Impact of Import Tariffs – OverallQ3 ’19 Q2 ’19

Higher prices on all used vehicles as market adjusts 56% 56%

Higher prices on imported vehicles 52% 55%

Higher prices on all new vehicles as market adjusts 41% 45%

Higher prices on domestic vehicles 30% 24%

Lower (or delayed) used vehicle sales 24% 19%

Lower (or delayed) new vehicle sales 22% 23%

Other 8% 4%

No concerns 2% 4%


26

Q: What, if any, positive impacts would imposing tariffs on imported vehicles and parts have on your business? Please select all that apply.


Positive Impact of Import Tariffs – Overall


27

Q3 ’19 Q2 ’19

Increased traffic for used vehicles 56% 57%

Increased margin on all used vehicles as market adjusts 36% 46%

Will make the market stronger overall 28% 25%

Increased domestic vehicles sales 24% 19%

Increased margin on all vehicle repairs as market adjusts 14% 4%

Increased margin on all new vehicles as market adjusts 9% 10%

Other 2% 2%

No positive impact 21% 19%



Negative Impact of Import Tariffs – Franchise


28

Q3 ’19 Q2 ’19

Higher prices on all used vehicles as market adjusts 45% 45%

Higher prices on imported vehicles 62%* 59%

Higher prices on all new vehicles as market adjusts 64%* 65%*


Lower (or delayed) used vehicle sales 13% 12%

Lower (or delayed) new vehicle sales 41%* 36%*

Other 4% 5%

No concerns 3% 3%

* Significant difference from Independent Dealers



Positive Impact of Import Tariffs – Franchise


Q3 ’19 Q2 ’19

Increased traffic for used vehicles 33% 35%



Increased domestic vehicles sales 36% 43%*

Increased margin on all vehicle repairs as market adjusts 30%* 13%*

Increased margin on all new vehicles as market adjusts 38%* 23%

Other 6% 10%


* Significant difference from Independent Dealers



Negative Impact of Import Tariffs – Independent


30

Q3 ’19 Q2 ’19

Higher prices on all used vehicles as market adjusts 63%* 61%*

Higher prices on imported vehicles 46% 54%

Higher prices on all new vehicles as market adjusts 27% 34%


Lower (or delayed) used vehicle sales 31%* 23%*

Lower (or delayed) new vehicle sales 10% 16%

Other 10%* 3%

No concerns 2% 5%

* Significant difference from Franchised Dealers



Positive Impact of Import Tariffs – Independent


31

Q3 ’19 Q2 ’19

Increased traffic for used vehicles 64%* 63%



Increased domestic vehicles sales 20% 12%

Increased margin on all vehicle repairs as market adjusts 9% 1%

Increased margin on all new vehicles as market adjusts 0% 6%

Other 0% 0%


* Significant difference from Franchised Dealers

32

Contact Information:

Dara HailesManager, Public RelationsCox [email protected]

Mark SchirmerDirector, Public RelationsCox [email protected]


32

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Documents

Dealer Sentiment Index - Cox Automotive Inc.€¦ · dealer population. Data is used to calculate an index wherein a number over 50 indicates more dealers view conditions as strong